Ladies and gentlemen, thank you for standing by. Welcome to the QIAGEN N.V. Investor and Analyst Conference Call on the Q4 Results 2012. Throughout today's presentation, all participants will be on listen-only mode. The presentation will be followed by question-and-answer session. (Operator Instructions).

I would now like to turn you over to your host John Gilardi, VP Corporate Communications. Please go ahead, John.

John Gilardi

Thank you, and good afternoon and welcome to the QIAGEN conference call to discuss our latest quarterly and full year results. Joining me in the call are Peer Schatz, our CEO; Roland Sackers, our CFO; and Peter Vozzo, our new Director of Global Investor Relations based in Germantown, Maryland. A copy of the announcement and the presentation for this call can be downloaded from the Investor Relations section of our home page at qiagen.com.

Before I turn it over to Peer, please keep in mind that the following discussion and response to your questions reflect management's views as of today, January 30th, 2013. Today, we will be making statements and providing responses to your questions that state our intentions, beliefs, expectations, and predictions of the future. These constitute forward-looking statements for the purpose of the Safe Harbor provision. They involve certain risks and uncertainties that could cause our actual results to differ materially from those projected. QIAGEN disclaims any intention or obligation to revise any forward-looking statements. For more information, please visit our filings with the SEC.

I'd like to now hand over to Peer.

Peer Schatz

Thank you, John. Hello, I would like to welcome you to our conference call to discuss our results for the fourth quarter of 2012 and the full year. As you saw in our release last night, we made significant progress during 2012 on initiatives to drive innovation and growth. The efforts of our over 4,000 employees around the world were reflected in QIAGEN exceeding its sales and adjusted earnings targets for the fourth quarter and full year.

In 2012, net sales rose 10% at constant exchange rate ahead of the 8% to 9% growth rate we had set as a goal and reached $1.25 billion. Adjusted operating income grew 12% to $356 million, while adjusted diluted EPS was $1.08 for the year, which was $0.02 ahead of our target.

Results for the fourth quarter were also ahead of our targets. Net sales rose 4% at constant exchange rates and we were pleased given the challenging comparison against the fourth quarter of 2011, which included revenues from a major product tender.

Adjusted earnings per share were $0.34 compared to $0.31 year ago. I want to note here that we also achieved a 31% adjusted operating income margin in the fourth quarter, and that was a year ahead of the schedule that we had set as a target.

These results give us confidence in achieving the goals we have set for 2013, even in light of the challenging macro environment. Our top goal is to further accelerate sales and adjusted earnings growth through sustainable innovations, superior quality of products and services, and targeted allocation of our resources to do so.

Our goal focus on accelerating organic and strategic growth, delivering efficiency and effectiveness, further improving our position as an employer of choice, and also to exceed the expectations of our customers. So we've set important milestones for 2013. We're in track for the QIAsymphony installed base to breakthrough 1,000 placements during 2013 after exceeding our 2012 target and placing well over our originally set target of 200 systems. We have assembled a highly competitive R&D portfolio of molecular diagnostic assays with more than 35 projects. These are combination of internal R&D efforts as well as a series of new external collaborations some of which were announced earlier this year.

Many of the assays, which have been designed for use on the QIAsymphony, which will improve our value proposition to customers. Our ambition is to create a stream of U.S. and European submissions that is set to begin later this year. This is a core focus of ours and we are working internally and externally on many programs.

In personalized healthcare, we want to strengthen our leadership through new pharma co-development collaborations, conversion of KRAS market to our FDA-approved therascreen KRAS test is going very well and we are also preparing for a potential 2013 launch in the U.S. of the therascreen EGFR companion diagnostic for non-small cell lung cancer.

And you will all see here more from QIAGEN this year about our NGS initiative. We are seeing strong demand for the pre-analgesics products launched in November, and the first workflow solutions for use in clinical research in human healthcare are expected to be launched in 2013.

Turning to Slide 5, I would like to review the performances of our four customer classes in 2012 since they create an important baseline for accessing our prospects in 2013. Molecular Diagnostics continues to perform very well, particularly at the group of growth drivers that now account for about one-third of our total sales. In Prevention, the QuantiFERON test for latent tuberculosis delivered more than 20% sales growth in 2012 as planned. Our Personalized Healthcare portfolio which includes sales of companion diagnostic kits as well as revenues from our co-development programs again grew at a fast double-digit pace.

AmniSure has a very strong growth in the fourth quarter as we realized benefits from integrating this novel Point of Need test into QIAGEN's commercial operations and by creating synergies with our clinical sales force initiatives.

Our Profiling business also grew at a good pace gaining on-demand from QIAsymphony customers using this automation platform for viral load testing and HIV hepatitis as well as for current testing of esoteric pathogens in transplantation and other areas through QIAGEN’s artus assays or their LDTs.

As I mentioned earlier, instrumentation for QIAsymphony are going very well and exceeded our placement goals for 2012. The full sales contribution is understated in these results due to the shift to more and more reagent vendor contracts. However, these placements are creating important multi-year customer commitments and future revenue streams.

In the other molecular diagnostics sales of products for HPV testing wherein line with our expectations declining at a single digit pace and shrinking as a percentage of total sales. Volumes rose more modestly in 2012 as U.S. market conversion initiatives provided growth impulses.

Remember that only about half of our potential HPV tests are actually being performed. We continue to drive conversion to modern cervical cancer screening using HPV testing and are capturing volumes.

We are successfully managing our market share leadership. During 2012, competitor entries did not gain much market share as the superior clinical utility of R-HPV test continues to be demonstrated in studies. We are now three years following the first and over one year after latest entry and still have an overwhelming leadership in the United States.

Prices, however, remain under pressure and this was due to another round of multi-year contracts being signed with customers. So, lower prices more than offset volume gains as we had predicted. We anticipate much as the same in 2013.

In Life Sciences, which provided the other half of sales we saw outstanding growth in applied testing. The customers have reacted favorably to the QIAsymphony launch in early 2012 in this customer class to automate work flows for human ID, forensics, food safety and veterinary medicine.

Pharma sales grew at a mid-single digit constant exchange rate growth which was in line with our goal. During the second half, we felt the impact of pharma industry restructuring initiatives.

Academia was up 1% on a constant exchange rate basis in 2012 reflecting the cautious spending pattern of some of our customers in the U.S. and Europe due to funding uncertainties. However, we continued to grow faster than the market and are gaining share.

So, in summary, we are pleased with our performance in 2012 and exceeded our targets. We have competitive and differentiated portfolio with sample and assay technologies with untapped potential and are determined to accelerate innovation growth in 2013.

I would like to hand over to Ronald now.

Roland Sackers

Yes, thank you, Peer. Good afternoon to everyone in Europe and good morning to those joining from the U.S.

Let me start first by reviewing the full year. As you heard from Peer, we exceeded our target for net sales and adjustment EPS while making significant progress on our strategic initiatives.

On Slide 6, you'll see our results for the full year. Amid challenging market conditions, net sales at constant exchange rates advanced at a double-digit pace on a mix from the acquisitions of Cellestis, Ipsogen, AmniSure, which provided six percentage points of growth and four percentage points from the rest of the business. Currency movements had a negative impact of three percentage points on reported sales growth.

Adjusted gross profit rose 8% to approximately $897 million. We had set a target of 31% for the adjusted gross profit margin in 2012 and I am pleased that we achieved this despite product mix pressure from good instrument rates in the quarter as well as from higher sales QuantiFERON, which currently has a gross margin below the QIAGEN average, since it is still not manufactured in-house but through a third party.

Adjusted operating income rose 12% to $356 million over 2011 and the adjusted operating margin improved to 28% of net sales from 27% a year ago. As Peer mentioned, we have been reallocating the sources to our growth initiatives. We expect more benefits to emerge in the future and this should help us to promote our goal of 29% adjusted operating margin for the full year 2013.

Adjusted net income grew 11% to approximately to $261 million, and adjusted EPS of $1.08 per share exceeded our target for the full year by about $0.02. The adjusted tax rate was 21%, and in line with our target. This shows the benefits of ongoing tax optimization program. We anticipate here some marginal improvement overall for 2013.

I am now on Slide 7. In terms of the sales by geographic regions, the Americas provided 46% and grew 8% constant exchange rate wise based on organic growth rate as well as from the QuantiFERON latent TB test and the AmniSure test.

Personalized Healthcare delivered significant growth and we are pleased with the uptick of the therascreen KRAS companion diagnostic. Applied Testing also grew at a strong double-digit pace in this region. Our HPV franchise performed in line with our expectations driven by pricing pressure with a single digit decline.

Net sales in Europe, Middle East and Africa rose 9% CER. A number of countries in Northern Europe including Germany, France and Scandinavia performed well. The top emerging markets of Turkey and Russia also achieved organic growth. However, Southern Europe, as you know, has been challenging. Governments are holding back healthcare expenditures and research spending. But keep in mind that we have limited exposure to these countries.

In the Asia Pacific and Japan region, sales rose about 50% CER. China, Japan and South Korea all grew at double-digit rates in 2012 with solid growth seen across all customer classes. A number of these countries are also among our top emerging market, which represent 12% of sales. The current consumable business from the top seven emerging market was more than 20%.

I'm now on Slide 8 and this provides a few comments on the sales of instruments as well as on consumables and other revenues. Consumables and other revenues provided about 86% of sales and grew at 10% CER in 2012. All customer classes and the region supported the business expansion led by double-digit growth in Molecular Diagnostics and Applied Testing and slower growth rates in Pharma and Academia. Instrument sales provided about 40% of total sales rising 11% using constant-exchange rates over 2011 having a strong finish in the fourth quarter. As Peer mentioned, the roll out of QIAsymphony is growing very well.

Moving to Slide 9, I would like to review our results for the fourth quarter. We face a challenging comparison against fourth quarter of 2011 since it included the sales from a major product tender that we have noted previously. Still net sales was 4% at constant-exchange rate with 2 percentage point growth coming from very strong demand for AmniSure and the other 2 percentage points of growth coming from organic growth. As we noted in the press release, organic sales growth would have been about 4% in the quarter when excluding the tender in the year ago period.

Profitability improved significantly in the fourth quarter with a 31% adjusted operating income margin exceeding our target of 30%. The adjusted gross margin of 72% was largely in lined with the full year rate. Also remember that the 69% level in 2011 was an exception to recent trends and due to the gross margin impact of possible cost included in some pharma milestone payments. We also saw improvement in other expense areas.

Adjusted net income rose 13% to about $83 million from approximately $74 million in the 2011 quarter. Adjusted diluted earnings per share were $0.34 up from $0.31 in the year ago period.

The 2012 results also has lost about $0.005 of dilution from the net effect of higher interest expenses as a result of the private placement. The adjusted tax rate in the fourth quarter of 2012 was 14%, and this was due to the tax savings measures we had been implementing and planning and this put as in land is our target of 21 to 23 percentage points.

Also, in comparison to quarterly tax rate in 2011 was higher than usual due to the restructuring charges taken in the period.

A quick remark about the number of shares outstanding, which increased to 241.8 million from 236.7 million a year ago. Although, the share repurchase program reduced the diluted share count by about 1 million shares, in the fourth quarter of 2012 the figure out higher as recent gains in QIAGEN's share price led to an increase primarily coming from one of the convertible bonds. For comparative reference our third quarter share number was 242.1 million.

I'm now on Slide 10. To update you in the progress of our $100 million share repurchase program, which was launched in October 2012. As we have stated before, this program is a signal of our commitment to improving returns to shareholders. We are offsetting some of dilution from higher interest expenses coming from the U.S. private placement, which raised $400 million at very favorable rate and is strengthening our long-term financing profile.

The latest data as of January 25th shows that approximately $57 million of the program has been completed with the repurchase of 3.1 million shares at weighted average price of €14.11 and $18.84. And today, we are reaffirming the announcement we made in late 2012 regarding our intention to complete the program by the end of March 2017.

The impact of share buyback on the calculation of adjusted EPS in 2013 will unfortunately be more than offset by two factors, and these are incorporated into our full-year guidance.

First, we have higher interest expenses in 2013 of about $33 million, compared to about $23 million in 2012. So, this means dilution of about $0.02 to $0.03 per share. And second, we will have some dilution from the start of the U.S. medical device tech in January 2013, though this means additional dilution of up to $0.02. Another factor is that an increase in our share price leads to an increase in the number or shares and this is due mainly to our convertible bond. As we have been saying for some time, every $1 increase in the share price results in about 1 million additional shares in the diluted calculation.

As far our strategic flexibility, we have a solid balance sheet, a healthy free cash flow and significant financing capabilities. Moreover, we will continue to pursue targeted, value enhancing M&A opportunities in line with our long-term strategy.

Moving to Slide 11, as I just mentioned, we had a solid financial position at the end of 2012. This is evermore important given the phase of change in our industry in terms of new technologies, new products and opportunities for regional expansion.

Group liquidity rose about 75% to $485 million from $276 million at the end of 2011 in part due to the private placement. We used about $220 million of the new funds to payoff the revolving credit facility.

Net debt increased to $382 million from $338 million in 2011 and that led to lower shareholder equity ratio of about 66%. Leverage remained at about one-third of net debt to adjusted EBITDA in 2012.

The level of free cash flow in 2012 has been seen in light of the cash restructuring payments made during the year, which amounted to approximately $65 million.

We also had higher investments in property, plant, and equipment in 2012 mainly from expansion of our North American headquarters in Germantown, Maryland, and also cost of closing smaller size. For 2013, we expect a significant lower number in property, plant, and equipment expenditures.

With that, I would like to hand back to Peer.

Peer Schatz

Thank you, Roland. I'm now in Slide 12 to review our achievements of 2012 and the progress we're making on our strategic initiatives. In terms of driving platform success, the QIAsymphony rollout is going well. We also improved HPV automation with the launch of the Decapper unit in early 2012. A new topic in 2012 has been our initiative to enter targeted areas of next generation sequencing specifically clinical research and human healthcare.

The first pre-analytic products were launched in late 2012, and we're moving ahead with plans to launch a benchtop workflow with our own sequencer in 2013. We're investing heavily in this area and are very excited about this opportunity, and we'll start showing more information on this initiative later this quarter.

In terms of adding content, we completed two important submissions in the U.S. in the fourth quarter, EGFR, companion diagnostic, and the QuantiFERON-CMV test for monitoring the level of anti-CMV immunity in persons in risk of developing CMV disease, particularly immunosuppressed patients such as those who have had a transplant. The test which is based on our proprietary QuantiFERON technology, which provides an excellent fit with our leading position in infectious disease testing and transplantation and immune suppression monitoring.

We are particularly pleased to have received three positive U.S. regulatory decisions in 2012 clearance for the Ro-Gene Q PCR cycle, as well approvals for the Therascreen KRAS companion diagnostic, and the artus Influenza assay.

Another key moment was the launch of our next generation CE marked BRAF assay in Europe, which complements our extensive range of personalized healthcare assays, including KRAS, EGFR and others in this region. In first studies, our BRAF assays significantly outperformed the competition with higher sensitivity and discrimination of the key mutations to allow superior clinical value.

And in terms of growing efficiently and effectively the actions begun on late 2011, along with a series of organizational and leadership changes during 2012 are having a positive impact on transforming QIAGEN. These actions will help improve our growth and profitability in 2013 and beyond.

I'm now on Slide 13 to provide some insights on the success of the QIAsymphony Automation Platform. We expect to breakthrough 1,000 placements during this year and see significant untapped opportunities in Molecular Diagnostics, Applied Testing and our other current customer classes. The reasons for the uptick are clear. Customers are reacting very favorably to QIAsymphony being the only system offering sample to resolve processing for both commercial assays as well as laboratory developed tests. This is a need that other systems are not able to address. What you see from competitors are screening systems that can only handle a few commercial assays and not the LDTs which can be more than half of the test volumes in a typical molecular diagnostic lab.

In terms of placements, about 70% of the QIAsymphony placements are with molecular diagnostics customers. These worldwide placements include particularly good demand in the Asia-Pacific region as well. In the U.S., placements have been in areas where customers are using a lot of LTDs where placements in the rest of the world are driven by QIAGEN offering one of the industry's broadest menus of more than 20 regulated commercial assays and profiling in personal healthcare. We are seeing ongoing double-digit sales growth in QIAsymphony consumables and we have set goals for accelerating growth further in 2013. This is a favorable situation since we're securing long-term revenue streams.

As we've said before, there is a certain degree of cannibalization as we convert from customers using manual methods to QIAGEN kits on automated systems. However, we see the impact is very manageable. We're primarily gaining market share and we have seen no signs at all of any customer peaking in terms of consumables pull through on the system.

Average pull through rates are improving as well, and they range anywhere between $30,000 a year, and now more than $300,000 on some systems. So we're looking for further improvements in 2013 and beyond especially as we turn our attention towards expanding the menu and increasing throughput.

Moving to Slide 14, here you see an overview of our current menu of molecular diagnostic assays and also some of what we are working on in terms of potential submissions. We have 21 CE-IVD assays for use in Europe and other areas of the world and our ambition is to continue expanding it across these franchises.

In the U.S., 2012 was an important year as we gained approvals for the PCR cycle and the artus Influenza assay, as well as the Therascreen KRAS assay. In terms of potential submissions, you can see that we have a full slate in development and have reallocated resources towards these projects. These are some mix of internal activities as well as some external collaborations, a key priority of the R&D teams and our partners is expanding the menu in the United States.

So you will be hearing more from us during the year in terms of regulatory submissions and clearances and also with approvals particular for the Therascreen EGFR test in the U.S. that was submitted late in 2012.

Turning to Slide 15, as we've been saying QuantiFERON is expected to deliver more than 20% constant exchange rate growth on an annualized basis for the next few years and coming from a pro forma base of about $55 million in 2011. We continue to stress the potential of this test, both internally and externally, given the extent of latent TB in the world.

The WHO estimates that about one in three people worldwide have latent TB. And of those who do have this condition, which has no symptoms, about 1 in 10 will develop active TB. The challenge is to find those with latent TB and treat them before developing active TB and then infecting others.

The current market is about 55 million tests and more than 90% of those done are done with the old skin test created more than a century ago. This means that there is a vast market opportunity and we're actively converting the market.

This chart shows you the target groups for testing lead by public health and employment screening. We are putting additional resources to drive the use of this modern gold standard test across all groups. As an example, in the U.S. we're seeing immediate results from shifting some of our clinical sales reps to QuantiFERON-TB and have them call on physicians treating immunosuppressed patients, such as rheumatologist, endocrinologist, diabetologist, and oncologist. In other words, physicians treating patients with weakened immune systems and where patients with latent TB are at risk of becoming active. QuantiFERON-TB has significant potential, and we believe should surpass HPV in terms of sales.

A new driver could be a future combination of QuantiFERON with a development project we announced earlier this month. We have made a strategic investment in Drug Response Dx, a Germany company developing the test to evaluate rheumatoid arthritis patients to guide treatment with the TNF-alpha inhibitors.

A number of pharma companies have already expressed interest in this test, given the number of R&D projects underway to develop new RA treatment especially for the estimated 30% to 40% of patients who do not respond to TNF-alphas. This test would be highly complementary with the QuantiFERON-TB test, since the TB test is also required before the use of many biologic drug including TNF-alphas.

I'm now on Slide 16. In Personalized Healthcare, we reached and surpassed $100 million in sales in 2012 and this coming from a business only created in 2009. We expect growth of more than 20% constant exchange rate again in 2013 driven by contributions from assays, co-development project revenues and other products used for biomarker analysis and development.

The launch of the Therascreen KRAS Test in the U.S. for using patients with metastatic colorectal cancer is gaining momentum. Our number one priority is converting labs to our test. At the end of 2012 we estimate that laboratories were doing about 45,000 Therascreen KRAS tests on an annualized basis and, therefore, have converted a significant part of the market. This is double the estimated 20,000 KRAS test from QIAGEN being used before the FDA approval.

In fact, this morning, we announced that Clariant has adopted to use of the Therascreen KRAS RGQ PCR Kit as a companion diagnostic. Clariant has a customer base of more than 2,000 pathologists, oncologists, clinical labs, and hospitals. We're stepping up initiatives to reach oncologists and brand Therascreen as the test of choice for companion diagnostic.

Our teams are targeting physicians in coordination with our pharma partners through medical advisory boards and ensuring a presence in treatment guidelines. At the same time, we're stepping our programs for laboratory as a private option. The fact that QIAGEN will bring a broad portfolio of FDA-approved real-time PCR tests on one platform, and then with automation on the QIAsymphony is among the reasons encouraging laboratory to convert to our tests and platforms.

This means a key message to labs is that using the FDA-approved Therascreen test will not expose them to what could be significantly reimburse in regulatory and liability risks if they use an LDT. We're building a new market and growth will come as we continue converting labs and expanding the markets. We're also preparing the market for the entry of more Therascreen companion diagnostic and particularly Therascreen EGFR in 2013.

Next on Slide 17, we submitted our Therascreen EGFR tests in late 2012 for FDA approval in non-small cell lung cancer patients paired with afatinib from Boehringer Ingelheim. Compared to the two KRAS submissions in 2011 this was an important submission in several ways. It was the first time we completed a late stage registration trial simultaneously with the investigational drug candidate. It was also the first time we made the regulatory submission at the same time the drug candidate was submitted to the FDA. This was a major achievement for our team. Therascreen EGFR is an easy to remember and validated test testing for 29 mutations and partly with several individual report out.

We have been actively marketing previous versions of the test with several other drugs, have approvals in Europe, Japan, and soon in China and have a high market share in global EGFR testing. In addition, there is a significant body of QIAGEN and third-party licensed IP on this test. The target action date for an FDA submission is in the third quarter of this year.

Afatinib was granted a six month priority review status and it also receives orphan drug status meaning that it could have a longer exclusivity period. The need for new treatment options in lung cancer especially the non-small cell lung cancer area form that accounts for about 85% of all cases is critical given the high mortality rate.

Lung cancer is the second most common form of cancer in the United States but it is the deadliest. In fact, as you see on this chart, death each year in the United States due to lung cancer are about the same as well as for prostate, pancreas, breast and colon cancers together. We will be providing more perspectives on the sales of the therascreen EGFR test later this year. In any case, the price is expected to be higher than for KRAS, which is about $200 per reportable since it is a much more complex test. At the same time, keep in mind that there could be competitive EGFR tests, however, the label of the diagnostic approvals typically refers to a specific treatment.

I'm now on Slide 18 for a quick update on some leadership changes at QIAGEN. As you saw in the release, we announced that Dr. Tadd Lazarus joining QIAGEN in the beginning of the year as our new Chief Medical Officer. Tadd is an experienced physician with a wealth of industry experience. He has a strong track record in clinical trials and product development. He will be responsible for our overall medical strategy and this includes the clinical evaluation and the advancement of our portfolio of diagnostic assays. Tadd will lead our team of medical officers, which also includes Dr. Hélène Peyro-Saint-Paul and Dr. Masae Kawamura.

Hélène is the Chief Medical Officer at QIAGEN Marseille, which is the new for the Ipsogen subsidiary as per January 1. She will drive the development of biomarkers in cancer diagnostics.

Masae is a global expert on tuberculosis with experience in both the public and private sectors, and she is responsible for the development of our TB portfolio.

I am convinced that Tadd, Hélène and Masae and the rest of the medical team will play a critical role in advancing our R&D portfolio and creating valuable benefits for patients and physicians.

So, now on Slide 19, you have the goals for 2013, and they build on the achievement from 2012. Our top goal is to accelerate growth through expansion of our current business as well as through targeted acquisitions. The growth drivers as we have assembled in molecular diagnostics will be an important growth contributor in 2013 along with our rapidly expanding business in applied testing.

As I mentioned earlier, we plan to enter targeted areas of next generation sequencing with our own work flow sample to result and also to deliver double digit sales growth in the top emerging markets. This focus on improving the top line is accompanied by our ongoing commitment to optimize resource allocation. We are considering additional projects to implement in 2013 and these will be designed to free up additional resources for investments into our growth initiatives. These projects could result in additional restructuring charges.

Among the other goals, we are preparing to soon launch a new version of the QIAGEN website. Our teams are working to implement this highly interactive site which will include new ecommerce and social media channels to each customers.

In summary, we have begun 2013 with a clear focus on accelerating growth as well as improving our efficiency and effectiveness.

I would like now to hand over to Roland.

Roland Sackers

Yes, thank you, Peer.

On Slide 20, I would like to provide outlook for the full year and the first quarter 2013. For the full year, total net sales are expected to grow approximately 5% to 6% at constant exchange rate, with about 4 to 5 percentage points of organic growth and about 1 percentage point coming from AmniSure, which should become organic in the second quarter of this year.

Adjusted diluted earnings per share are expected to rise to about $1.16 to $1.18 for the full year. As I mentioned earlier, this includes a net diluted impact of about $0.02 to $0.03 per share from a constellation of factors. The anticipated dilution from implementation of the U.S. medical device tax to be up to $0.02 per share for the full year, an additional dilution of about $0.02 to $0.03 of the higher interest expenses due to the $400 million private placement, this more than offset an anticipated accretion of about $0.01 to $0.02 coming from the share repurchase program.

The distribution of sales growth during 2013 is expecting to show way in the first half of the year being below the full year average and then with the lower tax level at the second half.

So for the first quarter the guidance is equal to total sales growth of about 2% to 3% at constant exchange rate and this is a mix of contributions from AmniSure and organic growth. The reason for the sales growth profile includes this growth levers being expected to grow at a double digit constant exchange rate as a commonly large percentage of total sales.

We are again looking for more than 20% constant exchange with growth from QuantiFERON latent TB test and also for double-digit growth in personalized healthcare and building on the 2012 level. AmniSure remained a significant contributor to full year sales and we are looking for further growth in profiling driven by higher pull through with on QIAsymphony. This is on top of ramping up our investments in some emerging markets that again in late 2012.

This slide also contains assumptions for the adjustment operating income for the full year and the third quarter. For the full year, we expect share based compensation of about $30 million to $32 million, about $120 million for amortization of acquired intellectual property, about $25 million to $30 million for business integration, acquisition and restructuring cost, the adjusted tax rate is expected to be about 20% to 22% for the full year.

With that I will like to hand back to Peer.

Peer Schatz

Thank you, Roland. I'm on Slide 21 for the summary before we move into Q&A. We are pleased with the strong performance in 2012 and are building momentum to accelerate innovation and growth in 2013. And let me review again what we have announced.

We exceeded our targets for the fourth quarter and full year 2012 both in terms of sales and adjusted earnings growth. We made significant progress on our strategic initiatives while exceeding our target for new QIAsymphony placements and gaining important U.S. regulatory decisions particularly the launch of the therascreen KRAS companion diagnostic assay. We are advancing a portfolio of more than 35 molecular diagnostic assays and we have a number of regulatory submissions planned for this year.

We improved our efficiency and effectiveness by reallocating resources and we improved profitability with a full year adjusted operating margin of 28% and even reaching 31% in the fourth quarter a year ahead of schedule.

We are actively developing our company while enhancing shareholder value and at the same time maintaining our financial strength and flexibility. Our program to repurchase up to $100 million of shares is set to be completed by the end of the first quarter. This is a signal of our conviction in our future prospects and views that there is significant value potential in our shares.

In closing, we are looking to again deliver on our goals and are optimistic about achieving our targets and delivering a stronger performance in 2013.

With that, I would like to hand back to the operator to open up for the Q&A session. Thank you.

Question-and-Answer Session

Operator

Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator Instructions).

Our first question today comes from line of Tycho Peterson from JPMorgan. Please go ahead Tycho.

Tycho Peterson - JPMorgan

Firstly, just on margin guidance, you reached your long-term guidance a year ahead of schedule, you just mentioned, Peer. Can you talk about how you are thinking about the runway for further margin expansion versus reinvestment, and are you able to call out the specific investments on to need to make an NGS over the coming years?

Peer Schatz

Sure, I will take the NGS part of the question. I would just say in general to the first part of the question, we are definitely managing the company for improved efficiency and effectiveness going forward lets say tight focus also on the operating margin in particular. So, going forward, we do expect a continued improvement year-over-year on this trend. We had 28% on an average in the year 2012 and we expect that to move up.

In terms of the NGS investments, this is a significant investment. We have a lot of people working on this across all of our areas enzymology in the chemistry areas and automation and software. And this has become a significant cross cover initiative across R&D teams. This is already baked into the expectations for 2013; we are prioritizing these initiatives due to their significant and look forward to be able to reporting on their success.

Roland, do you want to give more detail on the operating margin?

Roland Sackers

Yes, I think as Peer said, we do feel quite comfortable that we actually can keep those I would say a very good level investing in to our R&D pipeline. You will also see that amount investing in R&D is actually going up over the course of 2013. At the same time, we will se significant level as we’re coming out of SG&A so that all and we will hopefully achieve that kind of 100 basis points margin improvement also for 2013 similar what we have achieved now for 2012 and we are also committed even beyond 2013 going into same kind of direction.

Tycho Peterson - JPMorgan

Maybe it’s a quick follow-up, Roland. Can you talk about the sustainability of the tax rate here?

Roland Sackers

Yeah, I think, we achieved our target. We said all in the year if you want to around 21 we hit that and it’s very typical at QIAGEN if you see this the fourth quarter is clearly kind of a catch up quarter which again is quite a Northern European based company. Nevertheless, we do believe given that everything staying the same as we are being marginally better even in 2013 depending what except in the U.S. one taxes might change but right now I think there is no indication on that.

Operator

(Operator Instructions). Our next question today comes from the line of Dan Leonard from Leerink Swann. Dan, please go ahead.

Dan Leonard - Leerink Swann

So, my question and essentially I am trying to reconcile the first quarter guidance with your guidance for the full year it looks like you’re being much more modest about the Q1 and I am wondering what wouldn't able you accelerate the business through the balance of the year? Thank you.

Peer Schatz

Ron, do you want to take that?

Roland Sackers

Yeah, sure. First of all, I will take a look back what we are obviously the sequential increase quarter-over-quarter, so it’s not really too unusual for us that we have a stronger second part of the year than the part first part of the year. I think what is clearly our profile is that a couple of the launches are clearly getting even more effective in the second part of the year. Speaking about our KRAS products building momentum, as Peer said before, the same is probably true for the EGFR. But also clearly having QIAsymphony on a much larger base and having a very strong second part of place -- second half of the year 2011 in terms of placement should giving us some additional move for the second part of 2012 as well. So lot of factors especially on molecular diagnostics and applied testing being done with a larger scale is driving them.

Operator

Our next question today comes from the line of Daniel Wendorff from Commerzbank. Daniel, please go ahead.

Daniel Wendorff - Commerzbank

Thanks for taking my question and it's relating to the QIAsymphony consumers consumption. And Peer, you mentioned that an average consumer consumption per year is increasing there. Could you potentially give us a number or range what the average consumption from QIAsymphony is right now and where do you expect it to go over the next few years? Thank you.

Peer Schatz

Right. So, I gave you the range of 30 to 300,000.

Daniel Wendorff - Commerzbank

Okay. It's a broad one.

Peer Schatz

It's a broad one, right, and there are different users of the system. So if people buy the system only for sample preparation use, which is the minority, is it would be about 30 to 30,000 at the low-end. If people run the whole system for instance for blood viral then you're can even go well ahead, well above 300,000.

We -- I often see in reports that the link with the assays is only seen if people buy a full system; this is definitely not true. So, a lot of people just buy an SP system, which is the sample to purify nucleic acid system, and have manual pipettes or their own generic liquid handling systems to set up the assays, and then run the assays on the Rotor-Gene again. So and combination of an SP and the Rotor-Gene can provide a significant pull through of reagents as well. And then some people will have to pull line up and that would potentially also allow them to go into even higher throughputs as they're looking at more a hands off experienced workflows.

So, we would have to go into individual customer segments and we would have to go into the different formats of the systems to give them target numbers that we have very precisely for the different types of segments. And we will probably see significant expansion of that volume as more LDTs are converted with commercial assays and also our menu expands in particularly in the United States going forward.

Placements in the U.S. are primarily LDTs and ASR placements. Some are running RUO here in their own validations and also partly you have the approve the products or product in submission, but this will definitely expand over the course of 2013.

Daniel Wendorff - Commerzbank

Okay. Well thanks.

Peer Schatz

I'm wiggling and it's tough for me to give you an exact number without going into the segments and then it becomes obviously very sensitive information. But we're going to see a significant increase of that volume.

Operator

Our next question today comes from the line of David Clair from Piper Jaffray. David, please go ahead.

David Clair - Piper Jaffray

I'm asking for Bill Quirk this morning. So, first one from me, I recognize you've less exposure to NIH spending than others in the group, but what are you including in your guidance about sequestration?

Peer Schatz

As you correctly point out, our academia sales are in the range of 24% of overall sales and U.S. is about half of that, so we're talking about 12% of sales plus minus just running the straight math being indirect exposure to that. As we said, also in the comments and the press release and Roland will give you further details in a second. But we're not including the impact of sequestration because it is still not quite clear where this is going to go; there are different views on this.

So, we're assuming a very, very modest or a conservative approach to NIH but just not the full hit of sequestration. The full hit of sequestration, however, is muted because it would hit academia sales to a certain degree and it would potentially hit some areas of applied testing and may be smaller areas of the healthcare system as well in terms of our exposure. Roland, do you want to quantify that further?

Roland Sackers

No. I think that was a perfect answer on that. I think it's even that we're it's of course academia is not only NIH budget related but is also a significant part of business coming from other funds, private funds. So, I would even -- I would quote as probably even smaller than Peer's calculation. Nevertheless, in terms of what if we incorporated I think is absolutely correct and then in a way we did it.

David Clair - Piper Jaffray

And if I could sneak in one follow-up here. Can you talk about the recent reimbursement price in the U.S. for the personalized medicine business? The levels are coming in a little bit lower than expected and what, if any, impact you see on pricing?

Peer Schatz

We're actually quite pleased with first results coming in. There is a wide array currently depending on the institution that is setting up the guidance, but the guidance coming in, in California which is a very important state in terms of its signaling effect, is very positive. We are also seeing some very strong trends towards putting an emphasis on using the FDA-approved product, which is giving us additional tailwind.

So, there are a lot of numbers that are currently putout but they are in a quite attractive area and I think EGFR will be important. Here we are talking about 29 mutation tests versus now looking at four to seven mutations in other tests or in some cases even only one or two. And this will be an important discussion over the course of 2013. But in general, we are quite pleased and also our customers are quite pleased with the level of reimbursement that they are getting for some of these newer tests.

Operator

Our next question today comes from the line of Doug Schenkel from Cowen & Co. Doug, please go ahead.

Doug Schenkel - Cowen & Co

So, many of the companion diagnostic tests that are currently working through the FDA are replacing existing -- to some extent replacing existing RUO kits that you sell today. At this point is there, do you have any clarity on how much of a price premium that you think would be -- that you think you would be able to get on these FDA approved products? And what’s the assumed rate of conversion to IVDs? And I guess if I could add one more component, what’s the dollar value of revenue associated today with these RUOs that you think you could convert? Thank you.

Peer Schatz

Sure. Doug, the data was partly on one of the slides. We showed that we had been running about 20,000 tests under RUO, with RUO products release that was universe, where we knew that our products were being used in the States for whatever purposes we obviously are not always privy to that. But we now see that we have more than doubled that in sales of FDA approved product i.e., the level of conversion has been very successful.

And we also see, for instance, in Europe, where our solutions are being used, that our market shares also against the LDTs are very high 70%, 80% in some cases in terms of or even higher in terms of the respect of test volumes. So, the fact that you have a regulated and validated product and especially the validated part is very important that is putting a lot of people into using the FDA approved product, and that has helped us a lot.

So, if you look at the price premium it is in the range of 40% to 50%. In some cases even higher above what the reportable was being sold at with an RUO product, and that is the number we are not getting any push back on.

Doug Schenkel - Cowen & Co

Okay, that's great. And if I could sneak in one more real quick was there any notable flu impact in the quarter? Thanks again.

Peer Schatz

Flu is definitely very attractive in terms of an opportunity due to the severe flue season at the moment but less so for the molecular assay. So, molecular flu is typically not a very significant volume unless people do a lot of genotyping like we did in swine flu or other so or you need an ultra-sensitivity test. So, in this case, it's not been seeing -- we are not seeing significant spikes in the molecular flu assays at least in anyway that would impact materially our overall franchise.

Operator

Our next question today comes from the line of Derik de Bruin from Bank of America. Derik, please go ahead.

Derik de Bruin - Bank of America

So, I know you're going to speak some more about sequencing of the AGBT meeting coming up in February, but can you just give us some teaser in terms of how your platform is going to stack up against what's out there in turn -- just a sense of how you expect to compete? I'm also curious to the follow-up like you are focusing much more on the clinical applications product. So, how do you see sort of building out that pipeline, and are you going to get involved in things like non-invasive prenatal diagnostics? And do you see any particular advantage to the platform you are working on versus others -- the applications are currently being run?

Peer Schatz

Sure, Derik. What we -- we have said before, we see that the market has a significant need for a sample to result workflow that allows our customers to go from primary sample to digital output in the way that could be routinely be performed in clinics, and a lot of features are currently quite cumbersome for routine applications as we all know. And there are a number of companies also doing a good job in many areas in developing systems and solution for next generation sequencing, but in particular for the clinical applications there is still some significant shortfall. And that is what we are trying to address. So, we are not going to go into the broad area of next gen sequencing but are focusing on this area of application.

So, sample to result workflows, integrated ecosystems, superior chemistries, entomology to chemistry, ultimately also the IT solutions are things that we are working on intensely, and there will be a stream of products that we will be putting out over the months and even years to come. It's an very exciting area developing very rapidly.

One area that I think should not be underestimated is the area of content. We today have one of the broadest content portfolios in the industry. We have over 200 panels that are already preformatted that reporting over to next gen sequencing formats and will have available.

What we also think is very important is that our clinical channel and the access to the clinical and with regulated and reimbursed clinical diagnostic assays is very important. So, we see next gen sequencing as a niche application and one of many. So, it's not the do all solution, but it is an important part of a molecular diagnostics franchise, and one that we hope to make a difference in.

Derik de Bruin - Bank of America

And just one quick follow-up. You've been successful with the therascreen KRAS and you are now launching the BRAF assay. How much of your companion diagnostic pipeline are basically products that you just have to develop the assay, the markers are validated, stepped up its nose and you are going to get a product out of it versus how much of it is exploratory work with the pharma companies and that you are still doing experimental and stuff it's not really having validated in the clinic? I'm still trying to get some sense of what sort of like your guaranteed revenue stream, you think about approaching, we are going to be hit coming out of this?

Peer Schatz

Good question. By far the majority, almost everything that we are doing in the area of personalized healthcare is paired up with drugs and are in a validated format. Everything we would be doing in the pharmaceutical area supplying the GeneGlobe assays, the 60,000 assays in pre-IVD formats that pharma companies can use that would be in the pharma piece. So, anything that is pre-validation would be pharma, anything that is going into paired, development, and validation is in the PHC area.

Operator

Our next question today comes from the line of Romain Zana from Exane. Romain, please go ahead.

Romain Zana - Exane

I have a question on your guidance because you highlighted your ambition to accelerate organic growth especially as of 2013, but the guidance sounds comparable to the one you issued last year. So, do we have to understand that the guidance might be conservative or is fair to assume that you may be see you at the end of the year among the higher, the double range of the guidance? And a follow-up question, a quick one would be to see when do you expect the U.S. HPV revenues to stabilize? Thank you.

Peer Schatz

Roland, you want to take the first part?

Roland Sackers

Yeah, sure. I would say our guidance is a holistic guidance. It is cautiously optimistic. We are clearly facing volatile time as we explained on the call especially on the academic environment. Nevertheless, we are increasing organic growth. As you recall 2012 organic growth rate was along 12% for the full year and again we are starting from this kind of basis point.

Now moving into 2013, if we are able to beat them, we have, I think we are happy about that. Nevertheless, with things moving into the right direction, and also as I said in the call, we also expect a good improvement over the course of the year, which then of course again is a business going for performance in 2014. So, I would say given volatile environment in parts of our business, our guidance is a fair point.

Peer Schatz

The second question on the sales of HPV testing products, if you look at the way these contracts are typically done the multiyear contracts will take a couple of three years for that pricing effect to move into the market. We are extremely successful in extending these contracts. There is some pretty wild pricing by some of the competitors out there and we are winning a lot of contracts actually at significant premiums to offered prices. So, I think this speaks for our product.

Nevertheless, on top of even increasing volumes, we will continue to see pricing pressures probably over the next couple of years. I think the good news is that U.S. sales of HPV testing products is about 12% of our sales base, and with - as that we are talking about 1% organic headwind that we have in this area. So, it is definitely manageable. It’s a fantastic product. It’s a great infrastructure supporter for us going forward. And I think it is also very good addition to our brand equity.

Operator

Our final question today comes from the line of Jon Groberg from Macquarie. Jon, please go ahead.

Jon Groberg - Macquarie

Just one really brief, if I can, clarification on the med device tax. Can you just -- that you said it was net number, I'm just curious. Are you are trying to offset that with any pricing in terms of unlikely given your comments just now on HPV pricing? But just, I'm curious how and how you are calculating that number. And then just bigger picture, Peer, you're at the 12% you said on your HPV 12% in the U.S., pharma it doesn’t like it's growing that much. Is there anything you can do in those, I know you are moving into sequencing but it is just big picture I guess, strategically and internally is there anything you can do to try and take that whole group of slower growing businesses and accelerate the growth assuming an end market that is kind of is what is, as you said? Thanks.

Peer Schatz

Well, so I think the market has changed over the last few years and we have -- I think ahead of the curve spend a lot of time rebalancing, where we invest our resources. So, it doesn't make sense to invest a lot on growth initiatives in areas that probably won't be able to support a lot of growth going forward. So, we -- and for instance, life science we are focusing on technology differentiation; in pharma by linking into our companion diagnostics franchise; in applied testing, it is on the platform success that we have is a spillover from the clinical diagnostics arena. In the diagnostics area, it's around the platform successes around the QIAsymphony systems and the QuantiFERON success that we have.

So, these are just the deliberate growth engines that we have always focused on and characterized as growth drivers, and they are getting premium resources. And in the other areas, we are investing to hold these franchises and are not trying to push for growth where it would be very difficult. So, its -- and as we said, over the course of 2013, we are going to see an acceleration over '12 and the outlook is most likely 2014 will then be an acceleration over '13 as well, and that would be our hope then for the medium term trend.

Roland Sackers

And on the medical device tax, of course is not only the HPV test where we have to pay medical device tax for in the U.S. Also other products for example take the Cellestis franchise is clearly affected by that. And I guess it's too early to say if companies and our industry are able to pass it on to customers. I don't think there is a general trend either way today. It's probably what we will see over the course of 2013 and see how it goes.

Peer Schatz

So, with that, I would like to close the conference call. I know we had a lot of people in the queue. We tried to get to as many as we could today. If you have any questions please don't hesitate to give Pete or me a call or send a note, we will be in touch. And thank you again for participating.

Roland Sackers

Thank you.

Operator

Ladies and gentlemen, this concludes the Q4 results 2012 conference call. Thank you for participating. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.